Bonds for those who save

Strong doubts greeted the government decision to issue «popular savings bonds» to enhance and rescue the public’s savings accounts, now beset by a precipitous drop in interest rates. Most bankers insisted that issuing state bonds with a competitive interest rate would upset the market and the terms of bank services and sow confusion without really benefiting savers. And they rebuffed it as a populist move. Things, however, are not so simple. Greece has a long tradition of saving which has nourished its growth and progress. Similarly, Greeks have always been depositors rather than borrowers. But sliding interest rates have discredited the value of deposits and thrown savers into despair, with no hope of rescuing their accumulated capital. Banks, for their part, have suffered repeated shocks over the past few years. They’ve lost most of their revenue from stock market transactions and their profits from the bond market and foreign exchange transactions, and have shouldered the burden of investing in new technology without cutting their personnel. Hence they are trying to offset the strain by maintaining a huge gap between interest rates on loans and deposits. The blow to public savings – always useful in sustaining social cohesion – has occurred at a time when the State is borrowing more than 26 billion euros annually while it essentially excludes the public by using banks to cover all its needs. The State could keep public savings alive by regenerating the mechanisms of short-term and long-term funding directly from the public. Why can’t the State issue the entire range of debt like it has done recently? What are the free-market rules mandating that people stay out of the state-borrowing process? At the end of the day, banks should get a taste of the competition and feel a bit more responsible for those who for decades have backed their growth.